Congress Should Revisit 2017 Tax Law’s Trillion- Dollar Corporate Rate Cut in 2025

JCT estimates the corporate rate cut will cost $1.3 trillion over 2018-2027, making it the most expensive part of the 2017 tax law.5 Another new study by a team of economists from Harvard, Princeton, the University of Chicago, and the Treasury Department estimates that the corporate tax cuts led to essentially dollar-for-dollar revenue losses, even after accounting for increases in investment due. [...] According to tax scholars Edward Fox of Yale University and Zachary Liscow of the University of Michigan, the negative economic impacts of the corporate tax 1 are likely decreasing over time, due to a rise in market power and so-called “super-normal profits” — returns on an investment beyond the level required to undertake the investment — as well as changes in tax rules.7 UCLA economist and forme. [...] The Smith-Wyden bipartisan tax legislation, which recently passed the House and is pending in the Senate, further highlights the need to revisit the deep corporate tax rate cut. [...] (See Figure 1.) The study also found that 49 percent of the earnings gains from the corporate cut flow to firm owners, 11 percent to executives, 40 percent to high-paid workers (those in the top 10 percent in their firms), and 0 percent to the 9 in 10 workers whose earnings place them below the 90th percentile of earners. [...] All else equal, shifting federal tax revenue away from the corporate tax base and towards the individual income tax would further widen the gap in the tax treatment of income from capital and labor.